Wednesday, July 13, 2016

When will China make its move?

I'm now reading Paul Kennedy's The Rise and Fall of the Great Powers, so I thought I'd ask a disturbing, alarmist, but important question. If China makes a bid to overturn the U.S.-led global order by military force, when will that bid come?

(This sounds like a job for...amateur made-up political science!)

First, two preliminary questions: 1) Will such a bid really come? And 2) What would it look like?

My answer to (1) is "maybe, maybe not." So far, there have been several modern examples of great powers not trying to overturn the existing order by force. The UK dominated the seas and built a huge maritime empire, but never tried to leverage its global power to dominate the other great powers of Europe; instead, it tried to maintain a balance of power that allowed it to be rich and secure. The U.S. made a few aggressive moves in the early 1900s, but only reluctantly joined World War 1, and then tried to go isolationist in the interwar years - it eventually became a hegemon, but only reluctantly. And the Soviet Union made a lot of threatening moves and came close to fighting the U.S., but backed off repeatedly. So there's plenty of precedent for new powers refusing to try to overthrow the old ones by force - in fact, the only real violent attempts in the industrial age came from Germany (twice) and Japan. But there still seems to be a decent chance that China will launch an attack against the U.S.-led coalition, given the "Thucydides Trap." So let's consider what happens if it does attack.

As for question (2), my guess is that it would be a naval attack in the South China Sea (against the U.S.) or in the East China Sea (against Japan, which would then call for help from the U.S.). Tensions have been rising slowly but inexorably in both places. A decisive naval victory against the U.S. would A) push American power out of Asia and establish Chinese hegemony in its backyard, and B) cause the U.S.' allies all over the globe to realize that America could no longer protect them, thus effectively ending America's position as a global hegemon. Such a conflict probably wouldn't go nuclear - the U.S. signaled its willingness to die to protect Germany, France, and the rest of Europe from the USSR in the Cold War, but it seems unlikely that it would do the same just to protect freedom of the seas in Asia. So if an attack comes, I expect it to be China trying to sink our Asian fleet. If it does that, it wins.

OK, now on to the main question: When will such an attack come, assuming it comes? Let's imagine we live in a worst-case version of a Paul Kennedy world, where great powers only care about hegemony, rather than the welfare of their people, etc. In that case, this becomes like the old Econ 101 question of when to cut a forest. Basically, if China is going to attack, it will do so whenever the opportunity cost of attacking - i.e., the benefit of waiting - drops below a certain threshold.

What are the benefits of waiting to attack? Basically, continued economic growth and technological progress. If we're in a Paul Kennedy type world, a larger economy means more military power, which means A) a higher chance of beating the U.S., and B) a higher chance of dominating Asia and the world after beating the U.S. Better technology means the same.

So if we're in a Kennedy world, we can think of GDP, maybe with some extra exponent on productivity, as the percent chance of getting "flow hegemony" in the objective function after an attack. But before the attack, flow hegemony is zero (because in this cynical world, power doesn't matter if you don't use it to rule the world). And there's some time discount rate too. So basically, when China's economic growth and productivity growth slow down below some threshold rate (representing the discount rate in their hegemony objective function), that's the time to attack.

Chinese GDP growth has already slowed substantially:

Current official figures are at around 6.6%, though the true figure may be closer to 5%. And many people think that only an unsustainable, unproductive debt-laden construction boom is keeping growth at that pace -- once it ends, many expect China to have to deal with the financial overhang from the boom, which could lead to a decade of slow growth. Productivity growth is much harder to measure, but what few data points we have point to a slowdown in recent years.

One big factor will definitely drag down Chinese growth in the years to come: population shrinkage. According to government estimates, the country's working-age population (15-60) has been declining since 2012, and has now shrunk by 26 million. The decline is projected to continue, accelerating sharply between 2020 and 2025:

Even an immediate baby boom wouldn't affect this number until 2030, so the repeal of the one-child policy will not change anything for a while - and given the low fertility of other Asian countries, and the lack of much interest in having more kids, it seems unlikely that the long-term effect of the repeal of the one-child policy will actually arrest China's population decline.

So after 2020, there will be a sharp decline in China's working-age population. If the "debt overhang" people (Chris Balding, Michael Pettis, etc.) are right, China will also have to deal with another sharp slowdown in growth sometime in the next few years. Meanwhile, productivity is slowing down as China reaches the technological frontier and is thus less able to acquire new tech through FDI joint ventures, forced tech transfers from multinationals, or industrial espionage.

All of this points to a Chinese attack sometime in the remaining years of this decade. IF, of course, they decide to attack at all, and if GDP enters the objective function in the way I just hypothesized.

In any case, after 2020, China's "window" for a successful overthrow of the U.S. might close. Rapid population aging and labor force decline, the slowdown of catch-up growth, and (possibly) the overhang from decades of debt buildup might do more than just reduce the benefit of continuing the "peaceful rise" strategy. They might actually cause severe domestic unrest in China, forcing the country to turn its energy toward domestic security matters. And even if that doesn't happen, China's inevitable economic slowdown may simply weaken the country's total military power, allowing the U.S. and its allies - perhaps including a fast-growing India - to retain hegemony into the indefinite future.

So I think that if China does decide to take the more violent, aggressive great power path, we can expect some action within the next few years.

1) don't you think that in the scenario of a Chinese attack USA will be able to put togheter a coalition to support them? I don't see Europe not taking a stance (willingly or "forcefully"), even less UK. What about India? On the other hand, who would support China? Russia?

2) Is Chinese Navy good enough to just have a shot against USA and Japan's ones?

I think Noah is assuming a limited conflict, not a WW3 equivalent total war between a China coalition and an American coalition.

Assuming this limited naval conflict occurs in the South China Sea or somewhere within aircraft range of mainland China then the strength of the Chinese navy is not important. Navies since WWII are (simplifying things) floating airports and floating missile launchers, plus some smaller ships that try to keep the floating airports from sinking. If China launches its bombers and missiles from the mainland while the US launches its bombers and missiles from a carrier group or two, then China has the distinct advantage that it is a lot easier to sink an aircraft carrier than sink land.

I think Noah is being way too optimistic thinking that such a conflict would not go nuclear. In a world of rational actors perhaps it wouldn't. Do you remember, "You get me the stories and I'll get you the war!"? I don't think things have changed for the better. Do you think people who chant "Lock her up! Lock her up!" at campaign rallies are rational actors?

There is so much trade integration between China and The United States, I don't feel it would ever be considered profitable in the eyes of the Chinese leadership to so directly attack America unless there were significant domestic issues pushing them towards aggression. (which is possible, look at what happened in Crimea) Absent that, I see little chance that they'll directly attack America, but Japan I see as a more likely potential target. The only problem with using an attack on Japan to attack the United States by proxy, is I'm not entirely sure The population of the United States would be willing to stand up to protect Japan, and of course in The United States, popular considerations are at least or more important than moral principle. Of course, this too would mean the end of American hegemony, just as much as an actual war between the two powers in which China is victorious would be.

Noah, I'd be very interested to hear your thoughts on the limits of economic methodology. It can't and shouldn't be applied to everything, and this strikes me as one if these situations. The world is just too complicated.

An apt comparison is with mathematical biology. It has its uses, but no-one in their right mind would try to develop a mathematical model of a dog (much less in closed form).

Mathematics is clean, the world is messy. How do you reconcile the two?

I think it will be more like an aggressively growing encroachment in the South China Sea, rather than an all-out attack. They'll skirmish with rival powers' navies and build outposts on islands and reefs, while implicitly sending the message to the US of "Do you really want to trade lives over a rock in the South China Sea, or for these people?"

It is still growing though and growth per capita may be even more important. I suggest looking at those earlier cases, particularly WWI as WWII was after the Great Depression, but colonization had locked Germany out of many areas which also isn't the case today, but then Trump could push them into a corner.

Why would China want to run the world? It hasn't worked out that well for the USA. You own the world and you own all the world's problems. It wants to be the great power in east Asia. A return its rightful place as per history, that's the thinking.

"All of this points to a Chinese attack sometime in the remaining years of this decade. IF, of course, they decide to attack at all, and if GDP enters the objective function in the way I just hypothesized. ... So I think that if China does decide to take the more violent, aggressive great power path, we can expect some action within the next few years."

Strange passage unless you interpret the elided paragraph as explaining why the GDP theory is established for this case, which I do not. I think you need to explain why we should believe Kennedy's theory before making a dramatic claim based on it.

Well, if developed economies keep growing at an 1% annual clip or so (which is what I think Summers calls "secular stagnation"), then even a "reasonable" 2 to 3% growth would allow the Chinese substantial catch up.And you forget the important part: how the military action is supposed to help China. For example,Germany and Japan had clear economic strategic goals in mind: natural resources (land for agriculture, oil, etc.) and markets (especially in the case of Japan).Military action led directly to the achievement of that goal.It's far from clear what equivalent goals could China have, and without that, it's pointless to even begin to imagine a confrontation.

There's a strong factor mitigating against the possibility. It is the significant downside of a sharp short war. If China loses, it's the end of the communist party and a real revolution. The current leadership might lose much more than their faces.

If we are assuming a rational actor the achievable objectives matter a whole lot and a conventional attack would just not be successful in any near future unless we talk nuclear weapons. The capabilities of the US are so far beyond what China could achieve unless they choose to devote massive resources. This isn't an Iraq, this is the type of war the US has spent Trillions preparing for, gaming out, and training for. Given that, the interesting question then becomes HOW the attack would come and in what way. The attack would likely have to take one of two never-before-seen vectors, 1) an engineered biological weapon or 2) some unforeseen cyber capability. These are the two areas where China could surprise the US and is certainly ones they are putting research into. A WWIII then becomes a crapshoot because nobody can really know a priori what the results of these attacks would be. Also, the nature of new weapons also means that those that use them may not be able to accurately determine their effectiveness which could make it more or less likely depending on the utility function.

I think the only "nation" that China is an existential threat to is Taiwan. China may or may not use force to resolve territorial disputes with all of the nation's that ring the seas that make up china's coasts.while resolving theses disputes by force to china's favor could put relations between china and the rest of the world in a deep freeze... it would not be an existential threat to any of the nations that share a coast on the same seas as china.

Even if some "black swan" event caused China to try...and be able to... destroy America's entire pacific fleet.. it would not be sustainable for them to keep up a blockade for long with out actually conquering the nations around them ...and that would require boots on the ground... and starting a nuclear war with India if you include them ...

China can take back Taiwan someday and no on will stop them...but most likely it will be a negotiated reunion...maybe at gun point. China can get away with "changing reality on the ground" in most of their territorial disputes...

But anything past that, is not something China...or ANY other power on Earth can do anymore... The calculations of war have changed... While Technology has given humans the power to destroy the planet...technology has also made it far more costly for big nations to truly conquer smaller ones...

We could have done better in Iraq...but look how hard that was for us... China would have less of a chance against Japan for sure.

If China wants to pour money into Pakistan and Central Asia - god bless them and good luck. Diverting Chinese savings into white elephant infrastructure in unstable countries is nothing but good news for the West (and the world outside China).

Japan thought it could destroy the American Navy at a stroke in 1941 and drive America from the Pacific. That fantasy lasted six months until the battle of Midway after which the war in the Pacific was basically a mopping up exercise.

An attach by China on the United States Fleet results in China automatically being at war with all of NATO. If all the NATO countries declare an embargo on Chinese imports and exports and the US Fleet with draws 200 miles and imposes a blockade the Chinese regime collapses within six months.

China may start a shooting war with the Philippines or Vietnam or Indonesia over the South China Sea. The US does not have a sufficient motivation for becoming involved in that fight. Better to sit back and let China alienate all of its neighbors.

The most dangerous scenario - because it is so unpredictable and chaotic - would be a collapse of the North Korean regime with China and South Korea then both rushing to occupy the country in the name of humanitarianism.

Even as a thought experiment, there's a lot here that doesn't make much sense.

"So if an attack comes, I expect it to be China trying to sink our Asian fleet. If it does that, it wins." The latter point is narrow and extremely naive. This hypothetical Chinese attack would kill thousands, if not tens of thousands, of U.S. sailors. (A Nimitz class carrier has a complement of over 5,000.) Does Smith really believe that level of casualties is likely to result in a quick and narrow conflict?

It's far more credible that China establishes hegemony in East Asia without a direct military conflict with the U.S. by eventually establishing a level of power that makes it unacceptable for the U.S. to contemplate risking war with China in the Western Pacific. Thus China would achieve its goals - a free hand in its dealings with Taiwan and a dominant naval position in the South China Sea and East China Sea - without direct military conflict with the U.S.

Kennedy's ideas about relative economic power aren't just about direct military conflict. A big part of his argument is military overstretch relative to economic resources and a compounding decline as too much military spending "leads to the downward spiral of slower growth, heavier taxes, deepening domestic splits over spending priorities, and weakening capacity to bear the burdens of defense" (p. 533 of The Rise and Fall of the Great Powers).

In short, it's far more likely that rising Chinese military power results in a situation where it's eventually untenable (economically and/or politically) for the U.S. to bear the increasing expense of keeping forces that could contest Chinese military power near China's shores. The potential casualties from such a conflict also enter into the equation for the U.S. to decide to pull back as at some point it becomes clear that the commitment of actual dollars and potential loss of life simply isn't worth it to the U.S.

There is of course the chance for miscalculation to result in a crisis and then direct military conflict that neither country really wants. There's also a chance for all sorts of other unintended consequences. Instead of acquiescing to Chinese dominance, perhaps Japan and South Korea each decide that they need to develop their own nuclear deterrent.